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Inequalities Risk Hampering Economic Development

By Katarina Pettersson

In the EU 2020 growth strategy, the goal for the European Union is to become a smart, sustainable and inclusive economy. This policy formulation suggests that the goal has yet to be achieved. One indicator of its failure to become smart, sustainable or inclusive is the lack of gender equality between women and men, which in turn implies that the full potential of human resources for the development of the economy and society in general has not yet been realised.

However, there is an increasing understanding that gender equality is essential for economic development, in addition to fairness and an inclusive societal development. Gender equality in broader economic terms means utilizing everyone and allowing everybody – both men and women – to be assets for development through such means as higher education, employment in the labour market, research, innovation and entrepreneurship.

Gendered inequalities

In the EU labour markets, the average employment rate for women is 62.1%, compared with 75.1% for men, suggesting that the EU can only reach the overall Europe 2020 target rate of 75% employment if a strong commitment to gender equality is made (source visited Dec 19, 2012). However, regional variations exist, and in the Nordic countries the average employment rate for women is over 70% (except in Finland) compared with that for men, which is around 75% (Nordic Statistical Yearbook, 2008). Although many women are employed, they tend to work part-time. In Denmark, 38% of women work part-time; in Finland the corresponding figure is 20%, and in Sweden 40% (source visited Dec 21, 2012). In Norway, 40% of employed women work part-time and among mothers the figure is almost 50% (source visited Nov 6, 2012).

One explanation for the gendered inequalities in employment rates is the unequal distribution of responsibilities for the care of children, grandchildren and elderly parents. Despite various policies and measures for the advancement of gender equality promoted and implemented in the EU member states, women remain the main carers. Women in Europe between the ages of 25 and 44 spend three times longer than men on child-care per day.[1] Statistics also reveal that the labour market participation of mothers is 12.1 percentage points lower than that of women without children, while the rate for fathers is 8.7 percentage points higher than that for men without children.[2]

A related explanation for women's lower labour market participation rate is lack of affordable and good quality child-care. An indication of this lack are figures revealing that in the EU, an average of 50% of children under three years of age are cared for by parents (mothers) alone.[1]

Another gendered inequality in the labour market is that women and men are to a large extent employed in different sectors of the economy, a situation sometimes referred to as horizontal gender segregation. For example, the OECD [3] concludes that women are under-represented in the business sector and concentrated in health, welfare, education and administrative jobs.

Women are also self-employed to a lesser extent than men. Approximately 30% of entrepreneurs are women in the Nordic and OECD countries. [3] Furthermore, there is a gender pay gap between women and men because women earn on average 16.4% less for every hour worked, with considerable variation among member states. [4] The gender pay gap is caused by multiple factors, such as gendered labour market segregation and differences in work patterns. According to the European Commission, differences in educational choices and biased evaluation and pay systems also play a role.

Vertical gendered segregation in the labour market consists of inequalities between women and men in leadership positions. The EU reports that boards of directors are dominated by one gender; in publicly listed companies, 85% of non-executive board members and 91.1% of executive board members are men (source visited Dec 21 2012). The OECD [3] describes a 'glass ceiling' because women are disadvantaged in terms of decision-making responsibilities and senior management positions; at the boardroom level, there is only one woman for every 10 men.

The economic benefits of gender equality and more women

Besides the fairness argument for gender equality, there has been support for the 'economic case' for gender equality (see also [3]), the 'business case' for diversity and for gender equality [5], as well as the 'innovation case' for gender diversity [6]. These conceptualizations imply benefits for businesses, innovative milieus or innovation systems and regional and/or national economies of diversity (including 'racial' diversity), gender equality and gender diversity.

Forbes reports on evidence that having more women on boards improves decision-making and shareholder value while reducing risk-taking (source visited Dec 19, 2012). Herring finds gender diversity to be associated with increased sales revenue, more customers and greater relative profits.[5]

The benefits of gender equality for businesses include a 17% improvement in stock-price growth with more women in business management.([7] 2009) Furthermore, having more women on boards is associated with a higher return on equity by as much as 41% for companies with the largest proportion of women on their boards, compared with those with none. ([7] 2010)

There are positive effects of gender equality in innovation systems. Researchers have argued that gendered stereotypes of innovation risk hampering innovation policies and networks. This is because the innovation potential of certain actors (women), industries (women-dominated and gender-balanced industries) and certain kinds of innovations (service innovations) is ignored. A gender perspective on innovation to include not only technological/manufacturing innovations but also social, organizational and health-care innovations has been suggested. [8] [9]

Danilda and Granat Thorslund [6] have identified six ways in which a gender perspective increases the innovative capacity of innovation milieus:

Competition for well-educated employees (making better use of women's talents and skills)

Gender diversity as a driver of creativity and innovation (gender-balanced enterprises are more likely to innovate)

Competition with user-driven innovation (including women as users)

Gender as a means of design innovation (innovating products that challenge gendered stereotypes)

Competition by image shaping (improving companies' image by being inclusive, including in terms of gender equality)

The economic case for gender equality includes the above-mentioned benefits and evidence of gender equality leading to better productivity and economic growth, through women being employed in the labour market.[3] In addition, increasing women's employment can help overcome the demographic challenge of a shortfall in the number of European workers, which is expected to increase in the coming decades, particularly for the highest qualified jobs.([7] 2007, 2008, 2010 and 2012)

Policy initiatives

An increasing understanding that gender equality is essential for attaining economic development – and being smart, sustainable and inclusive – has resulted in a plethora of policy initiatives. The EU initiatives include the Strategy for equality between women and men 2010–2015, which outlines a comprehensive framework committing the European Commission to promote gender equality in all its policies with the following thematic priorities:

equal economic independence for women and men

equal pay for equal value

equality in decision-making

dignity, integrity and an end to gender-based violence

promoting gender equality beyond the EU and a reduction in horizontal segregation

In addition, the European Commission's proposal for legislation to attain a 40% representation of the under-represented sex in non-executive board member positions in publicly listed companies, with the exception of small and medium enterprises. [10] Furthermore, in 2012 the EU launched a new programme called Equality Pays Off. It is intended to support the efforts of companies in addressing one of the major challenges of the future – skills shortages – by promoting equality between men and women, thereby reducing the gender pay gap (source visited Dec 19, 2012).

The OECD [3] presents the following key policy messages. Greater gender equality in educational attainment has a strong positive effect on economic growth, and good and affordable child-care is a key factor for better gender equality in employment. Change must also occur at home, because the bulk of housework and caring is left to women in many countries. Policy can support such changes, for example, through parental leave policies that explicitly include fathers. According to the OECD, equal access to finance for male and female entrepreneurs needs to be assured.

Nordic initiatives include the Norwegian law requiring 40% representation for women on boards of publicly listed companies, which went into effect in 2004. The law, which concerns 2000 firms, is reported to be a success and the proportion of women on boards rose from 6% to 40% between 2002 and 2009. However, it has been argued that the law should have been followed by effective sanctions and state measures to stimulate action. Similar legislation has since been passed in Spain (2007), Iceland (2010), France (2011), the Netherlands (2011), Belgium (2011) and Italy (2011).[11]

In Sweden, there is an Action plan for gender equal regional growth 2012–2014 [12] because the regions' economic growth initiatives have been found not to be gender equal, and the gender equality policy has lost pace in regional growth policy work. Each of the 21 regions must prepare an action plan, including an analysis of the current state of gender (in)equalities related to regional economic growth policies. The plan must set goals and propose activities.

There is ample evidence for the economic benefits of gender equality and increasing the number of women in business, and policies are being implemented to attain a smarter, more sustainable and inclusive economy. The OECD ([3] p. 13) also reminds us that "Gender equality is not just about economic empowerment. It is a moral imperative. It is about fairness and equity and includes many political, social and cultural dimensions. It is also a key factor in self-reported well-being and happiness across the world".

[1] European Institute for Gender Equality, 2011, Review of the Implementation of the Beijing Platform for Action in the area F: Women and the Economy. Reconciliation of Work and Family Life as a Condition of Equal Participation in the Labour Market

[2] European Commission, 2012, Progress on equality between women and men in 2011 – A Europe 2020 initiative